Secrets to successful investing

Navigating stock market downturns

Market Volatility explained

 

What's happened?

Shares of technology companies have fallen sharply in the US and Asia as investors question how quickly artificial intelligence (AI) can continue to grow.​ The falls followed the US midterm elections, where some candidates called for limits on new AI data centres – the buildings that house the computers needed to run AI.​

European shares have also fallen, though less sharply than those in the US and Asia. Share prices have also fallen in other types of business, including retailers and healthcare companies.​

This means the effects could reach a wider range of investments, not just those focused on AI. It’s too early to know how long these falls might last or whether markets could fall further.​

The key thing to remember is that the effects of these events are usually short-lived. Markets usually recover fairly quickly.

Investing should be for the longer term which can help ride out any of these short-term ups and downs in value. 

What to think about

The potential benefits of staying invested​

When markets fall, it’s natural to feel concerned. But making sudden decisions can mean locking in losses. Staying invested can help because markets typically balance out over time. You may also benefit if they recover. Just remember, the value of investments can go down as well as up.​

Investments tend to grow overall over longer periods. So, if you take your money when the value’s dropped, you may not get back what you originally paid in.

Focusing on the long term

Investing works best over the long term. It gives you time to ride out short term movements and avoid knee jerk decisions that may harm your returns.​

This is especially true for pensions. When you're years away from retirement, you're likely to be investing more in shares. Shares carry more risk than other types of investment, but they have the best growth potential. As you get closer to retirement, you’re likely to favour lower-risk investments like bonds. This would mean the opportunity for growth might be lower, but so is the potential volatility.

Shares tend to perform well over time

Although past performance can’t predict the future, shares have historically delivered better long-term returns than most other types of investment, such as bonds or cash.​

Shares can be more volatile, especially when there’s economic or political uncertainty, but they typically perform well when viewed over longer periods.

Diversification is key

Diversification, spreading your money across different types of investments, regions, and industries, helps reduce risk. Both our Ready-Made Investments and Ready-Made Pensions are already diversified, which can help spread your risk when things get bumpy.

Remember

Successful investing needs discipline, patience and a focus on your long-term goals. By being resilient during market downturns, you better position your investments for long-term growth.

Investing for longer increases the likelihood of positive returns. Over a period of 5 years or more, investments usually give you a higher return compared to cash savings. But investments can go down as well as up in value, so you could get back less than you put in.

What UK market performance over the past 30 years shows us

The S&P World Index (GBP) shows long-term growth from 1995 to 2025, with several short-term declines caused by major world events.

Download the graph that shows the S&P World Index growth from 1995 to 2025 PDF(608KB) 

  • This chart shows the S&P World Index (GBP) from 1995 to 2025. The index starts at about £125 in 1995 and ends just above £930 in 2025. Over these 30 years, the index generally rises, but there are several periods where it falls due to global events.

    Key events and their impact

    • 1999 to 2003: The index climbs quickly, then drops to around £200. This change is linked to the dot-com bubble, the 9/11 attacks and conflict in the Middle East.
    • 2007 to 2009: The global financial crisis causes the index to fall sharply after reaching about £400.
    • 2015: Growth slows but stays positive. This is due to a slowdown in China, the Greek debt crisis and lower petrol prices.
    • 2020: The Covid-19 pandemic leads to a clear dip after a period of steady growth.
    • 2022: The index moves up and down but keeps rising overall. This period includes the Ukraine war, higher inflation and rising interest rates.
    • 2025: The index peaks near £1,200, then drops below £1,000. This is linked to new US tariffs.

    Summary:

    The S&P World Index (GBP) shows long-term growth from 1995 to 2025, with several short-term declines caused by major world events.

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More about the FSCS

Protecting your money

The Financial Services Compensation Scheme (FSCS) protects the eligible money you have with us.

More about the FSCS

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